Canex Metals (CANX) - Early-Stage Gold Explorer Built for Success

September 21 2020, 12:47 GMT+01:00

Silver Tiger Metals Inc.

  • Shares Outstanding: 53.06M
  • Share price C$0.26 (21.09.2020)
  • Market Cap: C$13.53M

We like this one. Canex Metals is an early-stage gold explorer with 3 gold exploration tenements in Northern Arizona: a strong mining jurisdiction. With $1.3M in the treasury and another USD$490,000 available through warrants at this end of this year, Canex Metals appears to have the credentials to deliver gold in the ground. Canex Metals is a small player, but there is always room for gold early-stage exploration in your investment portfolio. The geology is good, the share registry is excellent and the corporate structure is unusually tight. They have taken great care to set themselves up properly. Why is that important? Because it means they can afford to have a couple of dusters, raise additional capital and still have a good share count. Well, that's the way we read it.

The team has a strong track record and Ebert, a geologist, was candid and transparent. Lots of discoveries made by the team and also a record of M&A. They are chasing high-grade gold at surface.

Canex Metals' c.$13M market cap has recently seen a bump. Canex Metals has started to market itself effectively. The restructured the company a couple of years ago using money from Altius Resources. Talking to us is a good start, but this story needs to be heard by gold bugs. In this gold environment, anything seems possible. With $400,000 to spend on drilling over the next month, the market should have a much clearer idea of the Canex value proposition that is on offer in the near future. If they hit gold they should raise more money.

We Discuss:

  1. 2:34 - Company Overview
  2. 3:22 - The Foundation: History & Track Record
  3. 6:36 - Relationship with Altius Minerals Corp: Raises and Cash Position
  4. 8:11 - Team Experience
  5. 8:42 - Acquiring the Asset: What's There?
  6. 17:25 - Management Shareholding, Remuneration and Cost Mitigation
  7. 19:19 - Plan for Money Allocation: Drilling and Expectations
  8. 24:22 - Value Creation & Exciting the Market: Means of Minimising Dilution
  9. 28:31 - Thinking of Partnerships

Matthew Gordon: Why don’t you kick off, give us a one-minute overview of the project and then we'll pick it up from there.

Shane Ebert: Canex is focused on high-grade Gold, Northern Arizona. We're into an area with lots of widespread Gold mineralisation, not a lot of past exploration and a lot of good opportunities. We're excited about getting in there and exploring this new zone. It holds some really good, high-grade, near surface Gold upside for investors. We are putting together some really good targets and now we're at the drill stage, so this is where we start to test some of those targets.

Matthew Gordon: What's your history and track record?

Shane Ebert: I'm a geologist. Did degrees in Canada and Australia. I did my studies in Nevada, so a lot of history in the great basin. I worked through Nevada, Mexico from Alaska to South America, quite a bit. I’ve been part of a team that's had quite a bit of success over the last 20 years. Initially with Tyler resources, our team found and sold a large Copper deposit in Mexico. Since then we went on to discover Gold deposits in Newfoundland. I've been involved in Copper-Gold discoveries in British Columbia and a lot of project work throughout the Western U.S. This is an area we're comfortable with, we are comfortable with and we see a lot of upside.

Matthew Gordon: When did you get involved?

Shane Ebert: I've been involved now for about 12-years. After Tyler wrapped up and that company was taken over, we took on new management roles in this company. The precursor was Northern Abitibi Mining, involved in exploration all over the place. A few years back we restructured the company and Altius Minerals came in as a founding partner. They helped us recapitalise and they've been a really strong supporter of the company. This new company was looking for projects, and basically an opportunity came up in Northern Arizona that had really good potential. We saw a lot of Gold over a widespread area and a project where we could go in and put things together for low costs and meet our criteria, which are: we're looking for opportunity, but in this case, Gold, which is a great commodity in a fantastic location. Arizona is clearly one of the premier first-world mining jurisdictions. They're in the top 10 of the Fraser Institute. It's a great location. If you look, we have Nevada to the North, we've got Northern Mexico to the South. The geology continues through the two, lots of opportunities here. The management team loved the jurisdiction, saw good early-stage opportunity where we could leverage our skill sets and add value quickly through low cost, really good science on the ground, and bring to investors high-grade, near-surface targets that we see the scale to. I mean, it's exploration, it's early stage, but we're seeing what we want to see in terms of checking boxes for size, for potential, for what we need to actually make a real discovery that we can move to the next level, which would be resources and eventually monetising ore.

Matthew Gordon: You've been involved with this entity for 12-years, and Altius got involved when? When did they put money in?

Shane Ebert: A couple of years ago, we restructured, they helped us recapitalised and they got behind us as an exploration company.

Matthew Gordon: How much money did they put in?

Shane Ebert: They put in a few hundred thousand initially, to get us off the ground, get us moving. And that was the catalyst. It was at a time when it was hard to raise money. They saw the opportunity. They liked the background. They liked the people involved. They've been a strong supporter. I've done work for them in the past. They know our group very well. We've worked on projects. We made a Gold discovery with Altius in Newfoundland five, six years ago. We have a good working relationship. They liked the way that we put money into the ground. We're very effective and efficient with the capital that we do raise. It goes mostly into exploration, and they were very happy to support us at a time when it was tough to raise money a few years back. Definitely.

That kept us going, that got us the ability to look for targets, to focus and to move the company before.

Matthew Gordon: How much money have you raised since then and how much money have you got today?

Shane Ebert: Since then, just over USD$1M and a bit. Right now, we have about USD$1.2M cash and equivalents. We're spending a portion of that on this drilling program, but we'll come out of this with not as high a bank account as we'd like, but with still a healthy bank account to get us through the next 6 to 12-months.

Matthew Gordon: I just want to finish off with the management team: it's you and who?

Shane Ebert: The other technical person on the technical team is JP Jutra. He's a geologist, technical background. We have a couple of directors with a financial background that have really helped with the business side of things. And then we just have some core management teams that are great at capital markets, corporate, the rules and the regs of navigating the system.

Matthew Gordon: When and how did you then find the asset?

Shane Ebert: That's interesting: about a year ago, I got a call from a prospector who lives part-time down in Arizona. We did a deal with a separate company with that group, so he knew us from a different life. He was out metal detecting and he found some course nuggety Gold in place with his metal detector, they ended up taking out about 20oz of Gold from a little pocket that they'd had up. He took a picture, he showed it to me: it was a nice quartz vein with splashy Gold, looks really impressive. And I thought, that's pretty interesting - new discovery area that hasn't been looked at under about a foot of cover, looked like lots of upsides. I love Arizona. We're looking in the Western U.S. for projects. I hopped on a plane, came down, went out, looked at the site with him. It was definitely of interest.

It wasn't enough exposed to say too much about his discovery, but I spent a few days just walking around and I started to come up with some old workings from the 1880s, starting to trace some bigger structures. All of a sudden, I could see that there's potential here to put something together with some good, honest boots and hammer work on the ground. Seeing some visible Gold in some of these quartz veins, so you know it's mineralised before assays, and widths up to 5m. Right off the bat, I had a pretty positive impression. And we ended up doing a deal on a few claims. Since then we've grown the claims exponentially. We now have 145 claims, which surrounded that area, we've incorporated four or five small-scale past-producing Gold operations dating to the 1880s and including a small-scale heap leach operation dating from the 1980s.

We were able to assemble a land package and start to trace some of these mineralised zones. One of them we've traced for over 5km. We're starting to see the scale that we want in the system and widespread veins. Some of these veins are small. They're discontinuous. They're not what they're looking for, but put together as the whole package, they give us a really good idea of what's going on structurally, and our focus is to pull out via structure in good geology and geochem and all the typical methods, including geophysics, the bigger zones, the bigger targets, and that's what we've been focused on.

Matthew Gordon: What I would like to understand is how do we identify? What you think you've got there and why this isn't just a sort of capital promote type project?

Shane Ebert: Most exploration projects don't pan out. I mean, this is the riskiest stage. Basically, we're in the business of trying to mitigate risks. We've mitigated the political, social risk by being in a good jurisdiction, but how do we mitigate the exploration risk, the geology? How do you separate this from something that's of interest, but not going to go anywhere? To do that, what I like to do is look at certain criteria and check certain boxes in the exploration stage. One of it is them is, there is grade. We love to see grade.

Matthew Gordon: How do you know that?

Shane Ebert: You can have lots of mineralisation, but grade is hard to replicate. We see grade, we see halos around some of these things, but what we do is we have a picture here that has the potential for a bigger scale system. In nature, there's tons of small-scale systems. There are only a few bigger scale systems that actually become mines and actually become minable. And the key is just try to recognise that. You want to look for certain things here. We see a genetic model that works for us. It's got size, it's got analogies. We see structure, we see a distribution of mineralisation over a large area, and we see the potential to have the right traps to get higher grades zones of high-grade mineralisation, over bigger areas. That's what we're focusing on.

Matthew Gordon: But how can you say that? Give me some assurances about how you come to that conclusion?

Shane Ebert: To build those targets, you have to start from scratch. We started from scratch here. We had no information, no assays. Now we have over 2000 soil samples, over 500 rock samples. We use that surface data. We have flown a high-resolution airborne magnetic survey with drones. That survey has been really good, very low cost, but extremely good, high-quality information. We can map the structures and trace them on a surface. We can follow them and extend them with that geophysical survey. We can combine all of these quality datasets and start to develop targets understand the structure, understand the modifications of the mineralised zones, post mineral, which is common in this part of the world and put it all together into a picture where we can say, look, if there's mineralisation here, we need a few holes in this zone because it has got size potential. It could be this big or not.

But just to back up here, over half of our targets are directly targeting high-grade mineralisation that we see at surface. A lot of our targets are low risk. If we can duplicate what we see at surface, it's going to be a very good success for us. Then we go out and take a few flyers. Then we look at our model, we look at our structure, we look at the picture that we're building, and we say, okay, here's an area that we can't seem like it's covered. But if there's mineralisation there and our structural model suggests that could be a really good trap. We put a few holes into these areas. Maybe we've got a big soil anomaly. Maybe we've got other criteria that suggests there's Gold there. But basically, part of the risk exploration is you're taking some low-risk drill hole bets, but you're also taking some flyers on things that could maybe make a difference and change the game if they're successful. But realistically, you're only going to hit on a few of those if you do, right? That's the risk of exploration.

Matthew Gordon: What did you see when you were on the ground? What is the data, which is saying to you, this is not just some interim step for me until I find something more decent to go work on?

Shane Ebert: I's hard to quantify, but in a nutshell, what I see there is, is what I see when I work on other deposits that do have what it takes to become a mine. To make a direct analogy, I've worked a lot in the Pogo district in Alaska, and I've mapped a lot of these high-grade veins. I've mapped so many intrusions around there. I've seen some of the sheet and stock works in the intrusion and the distribution of these high grade around vein. By direct analogy, I liked what I saw there. On the ground here in Arizona, the desert has a pretty good memory, but you can go out there and there's no trenches, there's no drill holes. This has been gone over by a hundred companies in the past. We're putting together a new project in this area and testing the guts of it for the first time. It hasn't been done before.

The analogy that what we're seeing on the ground here with what I've seen in the field, in deposits of this style is very compelling. I like what I see. There's a lot of good similarities. Basically, analogies are a great way in this business to understand what you're looking at and move things forward. That's what we're doing here. We like what we see, we're seeing Gold, we're seeing structure, we're seeing the right kind of structure, and now we're moving forward and testing it.

Matthew Gordon: How committed are you? How much of your money is in this?

Shane Ebert: Over the years, I've got a few 100,000 of my own money. It doesn't sound like a lot, but as someone running and managing and doing this as a career, it's significant on my end.

Matthew Gordon: What you're going to do with USD$1M? How much are you burning through just in terms of the administrative component?

Shane Ebert: We're around USD$350,000 to 400,000 p/a in GNA. We run a pretty tight ship. We share offices, we do a lot to control costs, and a lot of that is just regulatory compliance. We don't have a lot of high overheads. We work project-specific and we do everything as cost-effectively as we can. We've done that for 20-years.

Matthew Gordon: How do you apportion your time between this and those projects?

Shane Ebert: With my other projects, we have teams involved in both. The last few years when things were slow, it's not an issue. There's not as much to do as you'd like, and work is good as things get busier as the demand on your time gets higher. It's basically assembling good quality teams that can do the work, that you have trust in, that can go out and get the job done cost-effectively and do it right and move things forward. Time management is very important.

Matthew Gordon: Are you paying yourself here? How do you remunerate yourself?

Shane Ebert: In terms of renumeration, I take a modest, daily wag and options. I'm in this for the big picture. My shareholdings and the option package I have is basically my compensation.

Matthew Gordon: How are you allocating capital to further develop your understanding of what it is that you have?

Shane Ebert: We're going to spend about USD$400,000 on this drill program. We've spent maybe USD$300,000 getting to this stage with the surface work, the geophysics, all the things that we've done. We'll spend about USD$400,000, then we'll have half a million, USD$600,000 in the bank post program. That is very much a results-driven way forward. We've got some really good shareholders behind us. We've got the ability to raise money when we need it. We can go into that a bit later, but as we have success and move forward like any junior, we need to raise money to keep things going. If things don't pan out, then you take your next opportunity and move forward with that.

Matthew Gordon: When are you hoping to report back to the market?

Shane Ebert: We will give regular updates now that drilling's commenced. Hopefully every week or thereabouts we'll put out an update. We've done a ton of surface work, so we'll be able to start putting out some surface results, but everybody wants to see drill results. That is what we're in this for. We're going to start sending complete drill holes to the lab in batches of two or three. Hopefully, depending on lab turnaround, in the next three, four weeks, we can start releasing drill hole results to the market and people can understand what it is that we're getting.

Matthew Gordon: Do they tend to be a lot harder than diamond drill results, because they are sort of more selective?

Shane Ebert: The drill results are usually more representative.What we're doing with this program, we have a lot of coarse Gold, so we can see Gold in a lot of the veins. That's always the hardest material to analyse to get a representative, repeatable result. The nugget effect is well known and it's challenging. What we're doing to mitigate that with drilling is doing a big size, taking big samples and prepping them in a way that we get the most representative samples that we can.

We have over 500 chip and grab samples now. You're right; sometimes you are understating, sometimes you are overstating. In case in point, we did a tranche about six months ago, we took a sample across an interval and we got around 2g/t Gold. We resampled the same interval and we got closer to 15g/t Gold. We know it's mineralised. We can see Gold in the vein, but the volume and where you sample that vein can make a difference. You have got to do whatever you can to mitigate that. Yes, when you're, when you're out there taking chips and grabs, they can be overstated, they can be understated. Hopefully, they are somewhere around what's representative, and you need big samples, but you also need to prep them right. You need to do everything that you can from a technical side to reduce the nugget effect.

Matthew Gordon: How do you go about assessing what is representative for the region or the district and what your expectations are when you start drilling?

Shane Ebert: When we released those samples, we're including samples of high-grade veins and we're including samples of the wall rock adjacent to the vein which could have low-grade mineralisation or no mineralisation. When we chip sample is zone, we want to get out of mineralisation. We want to sample the good stuff, but we also want the wall rock. When I say average is over 48 samples, or over 64 samples we're including zero value and the best value; not always the best way, you should really actually pull out your mineralised veins and take that range for those things. But it just gives people an idea.

We've taken lots of samples from the zone, and there's a lot of Gold in the zone. The drill will really help us determine continuity and grade through that zone. And that's what we're going to rely on.

Matthew Gordon: How long is this drill program lasting?

Shane Ebert: If all goes well and smoothly, which almost never happens in a field program, it should be about 21-days and we should have it wrapped up in about three weeks,

Matthew Gordon: Three weeks. And then in terms of your USD$400,000 spent, what period is that?

Shane Ebert: That's all through the drill program. It's all through the results that gets us to everything being done and complete and all results in, that will be a month and a half, that's about what our cash balance will be.

Matthew Gordon: You've got some very understanding shareholders, I see LTSS and others who, all things being well, should follow their money.

Shane Ebert: I think we can raise money, especially in this market. On the back of positive results, it gets a lot easier. Definitely. At some point we're going to have to look at keeping going, what's the next stage? What are we going to give to investors after this? A lot of that will depend on what we find. When we're done on this program, we've already got six or eight really good targets to drill test on phase two. If we can move forward with a few zones here that we can build resources on, that would be fantastic, because we can move right to the resource building stage and we can also start to bring on our new targets and test our new targets. As this program goes, we move things forward. We're continually bringing on new targets and as we understand new zones, and as the drill shows us where to go, where not to go, we can act accordingly and start moving forward and start to build value with the drill.

Matthew Gordon: When do you think the real value starts being created?

Shane Ebert: Typically, the discovery phase with the drill is where you add the most value on any project in any company. We're at that stage now. With some good drill results, there's a lot of upside here for investors, definitely,

Matthew Gordon: There's a lot of dilution coming, because you're going to need to raise this capital, right?

Shane Ebert: Certainly, dilution is always part of it and we're trying to manage that by adding value as we go. Two raises ago we raised money at USD$0.05c. The last time was at USD$0.09c. Now we're up around USD$0.24c. Our cost of capital keeps coming down, we're heading in the right direction. To exercise our business plan, we need more capital. We're going to need to continue to raise money through stages as we go and develop the resource as we can, as we get through the exploration stages. Raising capital is part of the business. There are different ways of doing that and we're going to be as sensitive as we can to keep our share structure as good as we can, as we move forward.

Matthew Gordon: Different ways of raising capital in the exploration phase – how is that?

Shane Ebert: You can bring in partners. You can look at other ways of bringing in capital. Different companies have different business models. We're very much a true exploration company. We want to identify good targets that we think can add value and we want to move those forward ourselves. Other companies may look for targets and bring in other people's capital to do the risky drilling and stuff. But we're an exploration group. We see opportunity. We identify it. If we don't like the opportunity, we're going to move on to the next one. But the big way to add value in this business of exploration, which is high risk by nature, is to take those gambles, take your best shots. And those companies with drill discoveries do very well in the market for shareholders.

Another thing I'd like to point out, Matt, is we've got more money coming in as we move forward: we've got USD$$230,000 worth of USD$0.10c warrants due in October that we expect to be exercised, that money will come in. We're going to receive about 125,000 shares of Canadian Nickel Corp through a deal we have with Spruce Ridge in holdings in an asset we monetize to Spruce Ridge in Newfoundland. That's almost USD$500,000 coming in, which will more than cover our drill program. We're going to have some money in the bank following this to move us to the next level.

Matthew Gordon: You are explorers. At what point do you start seeking a partner in whatever form or guise that maybe?

Shane Ebert: It's hard to say at this stage. We are explorers, like you say, we're not mine builders or developers; very different skillset. We recognise that and we're not trying to be all things. We'll focus on what we're good at, which is identifying, exploring, defining the resource. As we move forward and we get to those decisions that we may or may not need a partner, we will make those decisions. Eventually we'll potentially try to monetise the asset to a mine development group or other, but as we move forward, we'll look at those opportunities and do what's best for shareholders.

Matthew Gordon: Thanks very much for coming and telling us that story. It's an early-stage project. You seem to have a very clear view of how you're going to go about doing that. I do appreciate your track record and the involvement of people like Altius, et cetera. Come back on and let us know how the drill results go.

Shane Ebert: We're testing lots of targets. We have five or six different targets. We're testing multiple holes into each. We'll see what holds, but I'm excited. I'm excited that the drill is finally turning and that we're finally going to get a good look at what it is that we're doing out here. Then we've got some new, big ideas coming together, which can add value down the road. Lots of good things to come from Canex.

Company Page: https://www.canexmetals.ca/

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